India Panel Recommends Allowing Overseas Companies in Retail

By Malavika Sharma -
Aug 3, 2011

An Indian panel is recommending to
the country’s council of ministers that overseas companies be
allowed to own stakes in stores that sell more than one brand,
provided they invest at least $100 million.

“The government will consider and take an early,
appropriate and correct policy decision,” Trade Minister Anand Sharma said in parliament today. “The recommendations of the
committee of secretaries are very specific. There has to be a
defined percentage which will go only into the building of
infrastructure, and the minimum investment as has been
recommended should not be less that $100 million.”

India’s laws bar foreign ownership in multi-brand retail
operations. Overseas investors are allowed 51 percent ownership
in retail shops selling only one brand, and 100 percent in
wholesale stores. Wal-Mart Stores Inc. (WMT) and Carrefour SA (CA), who
already operate wholesale outlets in India, are seeking to
expand in a market that Business Monitor International estimates
may double to $785 billion in 2015 from $396 billion this year.

“More investments will come in once the front linkages are
established,” said Sharma. Foreign investment in retail could
help to generate “millions of jobs” in the country, he said.

The government has not formally received the
recommendations, Sharma said.

The panel, which met on July 22, recommended half the jobs
generated by foreign investors in retail should be in the rural
sector, and at least 30 percent of all products should be
sourced from small and medium enterprises, according to Sharma.

Carrefour can help in modernizing distribution in India,
Florence Baranes-Cohen, spokeswoman of the retailer based near
Paris, said last month.

India loses as much as 40 percent of its food grains and
fruit and vegetables after harvest due to the lack of proper
storage facilities and poor infrastructure, according to Sharma.
Food-price inflation in the world’s second-most populous nation
has averaged 10.56 percent this year.